Weekly Global Update for November 5, 2014

3Q'14 Global Electronic Equipment and Component Growth by Sector

Global growth estimates for the electronic supply chain for 3Q'14 versus 3Q'13 are now available on a preliminary basis.

• Chart 1 shows preliminary third quarter growth rates for various products in the global electronic supply chain.
• World electronic equipment shipments increased an estimated 3.2% in 3Q'14 versus 3Q'13. This was down from 4.0% in the second quarter (Charts 2 & 3).
• Historic electronic equipment growth is given in Chart 4.
• Growth appears to have peaked in this current business cycle (Chart 5).
• 3Q'14 inventories relative to sales were stable for the supply chain and will likely decrease in 4Q'14 (Chart 6).

These early estimates are based on incomplete data but they have historically been fairly accurate. Many, but not all, publicly traded companies whose fiscal quarter ended September 30 have now reported their results. However some large firms (HP, Medtronic, Applied Materials, Cisco) ended their quarter in October and others are just slower to report so final results won't be available until November month end. We'll issue updates throughout this month.

Source: Custer Consulting Group based on company financial reports

September U.S. Electronic Equipment and Component Shipments, Orders and Inventories

The September U.S. "Durable Goods" report was just released:

• Electronic equipment book/bill remained above 1.05 (Chart 7).
• Order growth for electronic equipment is at its highest level since early 2012 (Chart 8) as orders remained well above electronic equipment shipments (Chart 9).
• The ratio of electronic equipment inventories/orders is stable (Chart 10).
• Defense capital goods orders improved slightly in September (Chart 11).
• Aircraft and parts shipments reached an all-time high (Chart 12) as orders corrected from their huge July spike (Chart 13).
• Communication (Chart 14) and computer (Chart 15) orders and shipments were lackluster suggesting that most domestic growth is in the instrument and control sector. More details will be released soon in the "Factory Orders" report.

Source: www.census.gov/indicator/www/m3/

North American PCB Shipments Down 2.8% in September 2014 from September 2013 but up 10.1% Sequentially from August 2014 (Charts 16-18)

IPC reported that total North American PCB shipments decreased 2.8% in September 2014 from September 2013, reducing year-to-date shipment growth to -1.2%. Compared to the previous month, PCB shipments were up 10.1%.

PCB bookings increased by 10.6% compared to September 2013, improving the year-to-date order growth rate to -4.2%. Order growth jumped 17.0% in September compared to the previous month.

The North American PCB book-to-bill ratio declined to 0.99 in September.

"The North American PCB industry's solid sales and order growth over the previous month reflects normal seasonal patterns," said Sharon Starr, IPC's director of market research. "Despite strong order growth in September, orders continued to lag shipments by a small margin, pushing the PCB book-to-bill ratio just below parity. The trend indicates a likelihood of flat sales growth through the remainder of 2014," she added, "but a continuation of strong order growth in the last quarter could pull PCB shipments out of the current doldrums."

Source: www.ipc.org

Global Tablet Shipments up 11.5% y/y to 53.8 million units in 3Q'14 (Chart 19)

Worldwide tablet market grew 11.5% year over year 3Q'14 with shipments reaching 53.8 million units according to International Data Corporation (IDC). Marked by back-to-school promotions and U.S. appetite for connected tablets, the third quarter also saw shipments grow sequentially by 11.2% compared to 2Q'14.

"Not only is the U.S. market one of the largest for tablets, but third quarter results also indicate that this is where the growth is," said Jean Philippe Bouchard, IDC Research Director for Tablets. "We saw Verizon continuing to sell connected tablets at a fast pace, a strategy that we believe other carriers will replicate in following quarters. We also saw RCA enter the top 5, impacting the entire U.S. market and worldwide ranking with one large deal linked to back-to-school and channel fill ahead of Black Friday. Those two elements resulted in the US tablet market growing at 18.5% year-over-year compared to the worldwide market growing at 11.5% annually."

Despite a continued shipment decline for its iPad product line, Apple maintained its lead in the worldwide tablet market, shipping 12.3 million units in the third quarter. Samsung held its number two position on the market with 9.9 million units shipped, capturing an 18.3% market share in the third quarter. Asus regained its number three position with 3.5 million units and 6.5% share of the market. Lenovo fell back to the number four position with three million units. It is worth noting that Asus and Lenovo traded the positions they held in 2Q'14. The top 5 was rounded out by RCA, which achieved its position by shipping 2.6 million units primarily in one country, the US. Market share for the vendors outside the top 5 continued to outgrow the market, representing 41.8% of total tablet shipments in 3Q'14.

"Although the low-cost vendors are moving a lot of volume, the top vendors, like Apple, continue to rake in the dollars," said Jitesh Ubrani, Senior Research Analyst, Worldwide Quarterly Tablet Tracker. "A sub-$100 tablet simply isn't sustainable—Apple knows this—and it's likely the reason they aren't concerned with market share erosion."

Source: www.idc.com

Worldwide Smartphone Shipments up 25.2% y/y to 327.6 million units in 3Q'14 (Charts 20 & 21)

New smartphone releases and an increased emphasis on emerging markets drove global smartphone shipments above 300 million units for the second consecutive quarter. According to IDC vendors shipped a total of 327.6 million units during 3Q'14), resulting in 25.2% growth when compared to the 261.7 million units shipped in 3Q'13 and 8.7% sequential growth above the 301.3 million units shipped in 2Q'14.

"Despite rumors of a slowing market, smartphone shipments continue to see record-setting volumes," said Ryan Reith, Program Director with IDC's Worldwide Quarterly Mobile Phone Tracker. "We've finally reached a point where most developed markets are experiencing single-digit growth while emerging markets are still growing at more than 30% collectively. In these markets, smartphone price points are making mobile computing possible where we once expected feature phones to remain dominant. This is great news for overall volumes, but the challenge has now become how to make money on devices that are quickly becoming commodity products. Outside of Apple, many are struggling to do this."

A driving force behind the record smartphone volume was the combined effort of the vendors trailing market leaders Samsung and Apple. "The next three vendors – Xiaomi, Lenovo, and LG Electronics – all posted market-beating growth and with markedly different strategies," said Ramon Llamas, Research Manager with IDC's Mobile Phone team. "This shows there is still room to compete in this market, whether it be in the low end as Lenovo has done, at the high end where Xiaomi competes, or in both as LG Electronics has shown. Beyond the top five, there are a number of other vendors achieving similar results."

Source: www.idc.com

U.S. GDP grew 3.5% y/y in 3Q'14 (Chart 22)

Trade and defense spending drove third quarter growth.

Custer "Business Outlook" Presentations at Electronica

Electronica, Munich, Germany
November 11-14, 2014

Business Outlook for the Global Electronics Industry (with emphasis on Europe) 
By Walt Custer, President, Custer Consulting Group & Director, EIPC

Location: ZVEI Forum, PCB & Components Marketplace, Hall A2

Topics:

• Economic outlook
• Electronic equipment production by type and region
• Semiconductors and SEMI Fab equipment,
• Passive components including printed circuits
• EMS and ODM activities
• Electronic materials & process equipment
• Forecasts by Sector

See you in Munich!